Nigeria's cement crisis deepens as price hits N2,000/50kg in 2015

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Cement (1)The cement industry, which is a major component of the housing sector, has commenced the new year with an unresolved price war which was the main feature of the industry all through 2014 with a brief respite which followed a landmark intervention by Dangote Cement, the industry’s leading brand.

The industry entered 2014 with different prices for different brands, with the Dangote brand selling for an average of N2,000 per bag, while the price for the Lafarge brand hovered around N1,950 nationwide at city centres and N2,000 in the hinterland.

In mid Q4, Dangote however knocked down prices by 40 percent, this intervention seems to have collapsed shortly after the devaluation of the naira by the Central Bank of Nigeria (CBN), leading to a new price regime in the industry, with prices hovering around N2,000 per 50kg bag.

Though the manufacturers failed to link the new price increase to the devaluation of the naira, some analysts who spoke with BusinessDay, affirmed that while the new price increase might be driven by some “unforeseen market forces and political agenda”, it clearly defies the significant increases in capacity built over the past 12 years of backward integration in the industry.

A recent survey by BusinessDay across most markets, revealed that the Ikorodu area of Lagos recorded the highest market price of N2,000 per 50kg of cement among major brands, while others averaged N1,900 per bag within the same vicinity.

Likewise in the Badagry area of Lagos, a 50 kg bag of Dangote’s 42.5 grade of cement currently sells for an average of N1,900 per bag, while the Lafarge brand now goes for an average of N1,800.

In major cities in Ogun state, prices of major brands skyrocketed from an average of N1,500 to an average of N1,900 in the city centre and N2,000 per bag in the hinterland.

Kunle Lambo, cement dealer, and owner of Lambo Blocks Industry in Abeokuta, attributed increased prices of cement to devaluation of the naira which was caused by falling oil prices at the international market, saying the increase in the prices were not caused by middlemen but directly from producers.

“Before now, we used to buy a bag of Lafarge brand for N1,260 from the factory and we retailed it for N1,400. But, in the last two weeks, we have been buying a bag of Lafarge cement for N1,790 directly from the factory, therefore the dealers are re-selling it between N1,900 and N2,000 per bag.

At the Aba and Owerri axis, a bag of Ibeto cement which sold for N1,500 in late November now costs N1,900 per bag at major outlets, while Dangote also sold for N1,900 per bag.

Some cement dealers across the country who spoke to BusinessDay, fingered the major brands for the increase. According to them, as industry leaders, once these major brands raise their product prices, other brands follow.

BusinessDay recently reported that despite significant increases in capacity built over the past 12 years of backward integration in the industry, cement prices have remained relatively high.

Joseph Makoju, the honorary adviser to the President/CEO of Dangote Group, had stated that notwithstanding the drop in the price of the commodity by their company, end-user-prices would depend on the location, as the company would charge between N100 and N200 per bag for transporting the commodity from their factory to the depots in various parts of Nigeria.

Industry watchers have consistently maintained that prices would continue to differ at various locations, explaining that cement is a regional commodity whose prices depend largely on nearness to production plants and also on transport cost.

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